Debt Repair

Everything You Need to Know about the Military Debt Consolidation Loan

Though there is plenty of evidence suggesting that servicemembers and veterans care a great deal about their finances and work hard to create and stick to budgets, unforeseeable events can often create financial burdens that are difficult to overcome. The Military Debt Consolidation Loan (MDCL) is just one tool in veterans’ arsenals that can help them repair their credit and get back on track to financial wellness.

Why Do Veterans Have Excessive Debt?

Even though veterans tend to save more than other Americans, they are also more likely to experience significant financial troubles, including things like missed credit card payments, going into default on a mortgage, or even underwater home loans. There are many reasons for this.

  • Financial Inexperience – Those who enter the military at a very young age may have very little real-world financial experience following their service. This can lead to poor decisions and financial woes.
  • Frequent Relocation – One in four military families has more than $10,000 in credit card debt, and much of this debt is incurred as the result of relocating frequently – sometimes up to twice each year.
  • Unemployed Spouses – Relocation can also make it difficult for servicemembers’ spouses to hold down jobs, which has a negative effect on their work history and their ability to secure jobs in the future.

How Can the MDCL Help?

The MDCL is a federally-backed VA loan designed to help servicemembers and veterans consolidate their debt and make it manageable. In other words, if you have three credit cards, a high-interest auto loan, and a revolving line of credit with a high APR, making five individual payments each month – even as the interest continues to pile up – can be difficult. The MDCL is a lump-sum loan that allows you to pay these creditors in full, then make one single payment to the MDCL lender at a much lower interest rate.

How to Get a Military Debt Consolidation Loan

Veterans and servicemembers can qualify for the MDCL if they meet the same criteria for a VA home loan. Though veterans who already have a VA home loan are far more likely to be approved, such a loan is not a requirement, and many veterans who do not own homes have also taken advantage of the MDCL. It is considered a “cash-out” loan, which simply means that you can refinance your current VA home loan for the full value of your home, then use anything left to pay off your debts. For example, if your home is worth $250,000 and you still owe $225,000, you can refinance your home under the MDCL for the full $250,000 and utilize the other $50,000 to pay off your car, credit cards, and more.

Keep in mind that the lender ultimately determines whether you qualify for an MDCL and even how much you can receive, so no two cases or situations are exactly the same. Qualifying for the loan is relatively simple, especially if you already have a VA home loan in good standing. If you are struggling to pay off your debts, professional credit counseling and the Military Debt Consolidation Loan can help.

 

 

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